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FOR IMMEDIATE RELEASE
For further information, call
Bonnie Herron, 770/564-5504
or email to bherron@intelsys.com

INTELLIGENT SYSTEMS ANNOUNCES SECOND QUARTER 2005 RESULTS

***Earnings Conference Call at 11 AM Today ***

Norcross, GA – August 11, 2005 – Intelligent Systems Corporation [AMEX:INS; www.intelsys.com] announced today its financial results for the second quarter and year-to-date periods ended June 30, 2005.

            For the three months ended June 30, 2005, the company recorded revenue of $4.7 million, a 39 percent increase compared to revenue of $3.3 million for the same period in 2004.  Net income for the three-month period in 2005 was $695,000 or $0.16 per basic share ($0.15 per diluted share), a significant improvement compared to a net loss of $2.2 million or $0.49 per basic and diluted share in 2004.

            For the six-month period ended June 30, 2005, the company recorded revenue of $8.2 million, a 4 percent increase compared to the same period last year.  Net income for the six month period in 2005 was $476,000 or $0.11 per basic share ($0.10 per diluted share), compared to a net loss of $3.0 million or $0.68 per basic and diluted share in the six month period of 2004. 

            The increase in revenue in the second quarter of 2005 compared to the same period last year reflects both an increase in software license revenue as well as professional services and software maintenance revenue at the company’s VISaer and QS Technologies subsidiaries.  The company reduced its loss from operations by 86 percent and 43 percent in the three and six month periods ended June 30, 2005, respectively, compared to the loss from operations in the corresponding periods in 2004 as a result of growing revenue while reducing the company’s total costs and expenses. 

            In the second quarter and year-to-date periods ended June 30, 2005, the company recorded investment income of $914,000 and $1,956,000, respectively, reflecting principally cash distributions from ISC Guernsey, a minority owned entity that realized a significant gain from the sale of stock in a U.K. based company in 2004.  The company does not expect any additional cash distributions from ISC Guernsey in the future. 

            At June 30, 2005, the company’s balance sheet includes $5.8 million in current net deferred revenue comprised of amounts recorded by its four consolidated subsidiaries, net of associated costs, that is expected to be recognized as revenue within the next twelve months.

Conference Call Information

            As announced previously, Intelligent Systems has scheduled a conference call for today at 11 AM EDT to discuss the results of the second quarter and year-to-date periods for 2005.  The call-in number is 877-226-7144.  A transcript of the conference call is expected to be available by the end of business today by logging onto www.intelsys.com and clicking on the webcast icon.  The replay will be available for twelve months. 

About Intelligent Systems Corporation

For thirty years, Intelligent Systems Corporation [AMEX: INS] has identified, created, operated and grown early stage technology companies.  The company has operations and investments, principally in the information technology industry.  The company’s consolidated subsidiaries include VISaer, Inc. (www.visaer.com), QS Technologies, Inc. (www.qsinc.com), CoreCard Software, Inc. (www.corecard.com), (all software companies) and ChemFree Corporation (www.chemfree.com), (an industrial products company).  Since 1990, the company has operated the Intelligent Systems Incubator, an award-winning pioneer in privately sponsored incubators.  Further information is available on the company’s website at www.intelsys.com, or by calling the company at 770/381-2900.

In addition to historical information, this news release may contain forward-looking statements relating to Intelligent Systems and its subsidiary and affiliated companies. These statements include all statements that are not statements of historical fact regarding the intent, belief or expectations of Intelligent Systems and its management with respect to, among other things, results of operations, product plans, and financial condition.  The words "may," "will," "anticipate," "believe," "intend," "expect," "estimate," "plan," "strategy" and similar expressions are intended to identify forward-looking statements.  Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those contemplated by such forward-looking statements. The company does not undertake to update or revise any forward-looking statements whether as a result of new developments or otherwise.  

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share amounts)

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2005

2004

2005

2004

Revenue

 

 

 

 

   Products

$2,820

$ 1,786

$ 4,883

$ 5,013

   Services

1,842

1,557

3,358

2,942

    Total revenue

4,662

3,343

 8,241

7,955

Cost of revenue

 

 

 

 

   Products

869

804

1,732

1,789

   Services

980

707

1,849

1,517

    Total cost of revenue

1,849

1,511

3,581

3,306

Expenses

 

 

 

 

    Marketing

601

687

1,142

1,347

    General & administrative

800

914

1,759

1,809

    Research & development

1,675

2,102

3,302

4,202

Loss from operations

(263)

(1,871)

(1,543)

(2,709)

Other income:

 

 

 

 

    Interest income (expense)

12

(5)

18

(8)

    Investment income (loss), net

914b

(371)a

1,956c

(371)a

    Equity in earnings of affiliates

19

51

36

13

    Other income (losses), net

13

(9)

21

50

Income (loss) before income tax provision

695

(2,205)

488

(3,025)

Income tax provision

-- 

-- 

12

-- 

Net income (loss)

$ 695

$ (2,205)

$ 476

$ (3,025 )

Basic net income (loss) per share

$0.16

$   (0.49)

$0.11

$  (0.68)

Diluted net income (loss) per share

$0.15

$  (0.49)

$0.10

$  (0.68)

Basic weighted average shares

4,478,971

4,478,971

4,478,971

4,478,971

Diluted weighted average shares

4,628,183

4,478,971

4,638,043

4,478,971

 

  1. Includes $256,000 gain on investment offset by $627,000 investment write-down.
  2. Includes gain of $1.1 million offset by $161,000 write-down.
  3. Includes gain of $2.1 million  offset by $161,000 write-down.

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

June 30,

2005

December 31,

2004

ASSETS

(unaudited)

 

 

Current assets:

 

 

 

  Cash

$ 1,431

$   670

 

  Accounts receivable, net

3,592

2,931

 

  Inventories

741

653

 

  Other current assets

486

217

 

    Total current assets

6,250

4,471

 

Long-term investments

4,659

4,879

Property and equipment, at cost less accumulated depreciation

879

781

Intangibles, net

2,666

2,748

Other assets, net

17

25

Total assets

$14,471

$ 12,904

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

  Short-term borrowings

$    300

$    267

  Accounts payable

835

  867

  Deferred revenue

5,793

4,895

  Accrued payroll

1,212

928

  Accrued expenses and other current liabilities

560

552

    Total current liabilities

8,700

7,509

Total long-term liabilities

263

310

Minority interest

1,516

1,516

Total stockholders’ equity

3,992

3,569

Total liabilities and stockholders’ equity

$ 14,471

$ 12,904

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